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| CVV > SEC Filings for CVV > Form 10-Q on 14-Aug-2009 | All Recent SEC Filings |
14-Aug-2009
Quarterly Report
Except for historical information contained herein, this "Management's Discussion and Analysis of Financial Condition and Results of Operations" contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, as amended. These statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance, or achievements expressed or implied by such forward-looking statements. These forward-looking statements were based on various factors and were derived utilizing numerous important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements. Important assumptions and other factors that could cause actual results to differ materially from those in the forward-looking statements, include but are not limited to: competition in the Company's existing and potential future product lines of business; the Company's ability to obtain financing on acceptable terms if and when needed; uncertainty as to the Company's future profitability, uncertainty as to the future profitability of acquired businesses or product lines, uncertainty as to any future expansion of the Company. Other factors and assumptions not identified above were also involved in the derivation of these forward-looking statements and the failure of such assumptions to be realized as well as other factors may also cause actual results to differ materially from those projected. The Company assumes no obligation to update these forward looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements.
Results of Operations
Three and Six Months Ended June 30, 2009 vs. Three and Six Months Ended June 30, 2008
Revenue
Revenue for the three and six months ended June 30, 2009 was approximately $3,442,000 and $7,427,000 respectively as compared to $4,269,000 and $8,312,000 respectively for the three and six months ended June 30, 2008, a decrease of 19.4% and 10.6% respectively. We attribute this decrease to continued delays or reductions in capital expenditures by potential customers as a result of current economic conditions.
Gross Profit
We generated gross profits of approximately $1,030,000 and $2,057,000 respectively for the three and six month period ended June 30, 2009 resulting in gross profit margins of 29.9 % and 27.7% respectively for the three and six month period ended June 30, 2009 as compared to gross profits of approximately $1,152,000 and $2,369,000 respectively for the three and six month period ended June 30, 2008 resulting in gross profit margins of 27.0% and 28.5% respectively for the three and six months ended June 30, 2008. The increase in gross margins during the three months ended June 30, 2009 was a result of reversing our efforts from increasing our engineering and production personnel to reducing personnel considered non-essential for future growth. We reduced our workforce during the three and six month period by 25 individuals or 17.0%. However, we are still continuing the
Selling, General and Administrative Expenses
Selling and shipping expenses for the three and six months ended June 30, 2009 and 2008 were approximately $195,000 and $362,000 respectively. This represented decreases of approximately 4.4% and 6.0% respectively, as compared to selling and shipping expenses of $204,000 and $385,000 respectively for the three and six months ended June 30, 2008.
We incurred approximately $810,000 of general and administrative expenses during the three months ended June 30, 2009, compared to the approximately $883,000 incurred during the three months ended June 30, 2008. This represents a decrease of 8.3% or approximately $73,000 which is primarily attributable to a reduction in costs associated with personnel.
We incurred approximately $1,780,000 of general and administrative expenses during the six months ended June 30, 2009, compared to approximately $1,915,000 of general and administrative expenses incurred in the six months ended June 30, 2008, representing a decrease of approximately $135,000 or 7.0%. During the six months ended June 30, 2008, we incurred additional workers' compensation costs of $168,000 as result of a shortfall in a self-insured workers' compensation trust fund, in which we were a member from January 2000 through March 2006. Those costs were incurred as a result of the findings of a forensic audit performed on the Manufacturing Industry Workers' Compensation Self-Insurance Trust Fund (the "Fund"). We are no longer a member of the Fund. The Fund was established to enable the participating employers to self insure their workers' compensation liability exposure as provided for under the Workers' Compensation Laws of the State of New York. Under the terms of the agreement, we are jointly and severally liable for the expenses and obligations of the Fund and for the workers' compensation liability of all participating employers incurred while we were a member. We were advised that certain adjustments were necessary to comply with New York State Workers' Compensation Board regulatory guidelines for group self insurance trusts. The contributions previously charged have not been adequate to cover Fund expenses including future claims. As a result, we were advised that additional contributions of approximately $168,000 were required, which we expensed in full during the six months ended June 30, 2008. There may be additional contributions necessary as a result of any outstanding residual liability for any given contribution year. We are accruing an additional $5,000 per quarter for this potential liability based on our best estimate of anticipated future liabilities.
Operating Income
As a result of the foregoing factors, operating income was approximately $26,000 for the three months ended June 30, 2009 which represents a decrease of 60.0% compared to operating income of $65,000 for the three month period ended June 30, 2008.
We incurred an operating loss of approximately $84,000 for the six months ended June 30, 2009 compared to an operating profit of approximately $68,000 for the six months ended June 30, 2008.
Interest income for the three and six months ended June 30, 2009 was approximately $11,000 and $23,000 respectively, compared to approximately $23,000 and $60,000 for the three and six months ended June 30, 2008. This decrease is a result of investing cash in more conservative investments such as short-term treasury bonds and certificates of deposit, with lower returns than we previously received on money market funds. Interest expense for the three and six months ended June 30, 2009 was $62,000 and $127,000 respectively, compared to approximately $64,000 and $104,000 for the three and six months ended June 30, 2008. The primary source of this interest expense is from the mortgages on the three buildings that we own. The increase for the six months ended June 30, 2009 compared to the six months ended June 30, 2008 is attributable to a full six months of interest expense in 2009 on the mortgage on the building we purchased in February, 2008. As a result of equipment purchases, we have utilized $409,000 of our credit facility with Capital One, N.A. and converted it into term loans.
Other Income
Other income during the three and six months ended June 30, 2009 was approximately $13,000 and $12,000 respectively, compared to approximately $6,000 and $14,000 respectively for the three and six months ended June 30, 2008. Other income is primarily comprised of the cash received by the Company when it sells excess scrap metal periodically throughout the year.
Income Taxes
For the six months ended June 30, 2009, we recorded a current income tax expense of approximately $16,000 that was reduced by the recognition of deferred tax benefits of approximately $117,000 which provided a net tax benefit for that period, compared to a current income tax expense $138,000 that was reduced by the recognition of the deferred tax benefits of approximately $128,000 which resulted in a net tax expense for the six months ended June 30, 2008.
Net (Loss)/Income
We reported net income of approximately $11,000 for the three month period ended June 30, 2009 compared to net income of approximately $7,000 for the same period in 2008.This increase was primarily attributable to the income tax benefit realized in the current three month period compared to the income tax expense incurred during the three month period ended June 30, 2008.
For the six months ended June 30, 2009, we reported a net loss of approximately $76,000 compared to net income of approximately $26,000 for the six months ended June 30, 2008. As previously mentioned, the net loss incurred for the current six month period is a result of decreased revenues attributable to delays or reductions in capital expenditures by potential customers as result of current economic conditions.
As of June 30, 2009, we had aggregate working capital of approximately $9,672,000 and cash and cash equivalents of $4,928,000 compared to $9,849,000 and $5,721,000 respectively at December 31, 2008, a decrease of $177,000 and $793,000, respectively. The decrease in cash and cash equivalents was primarily the result of the satisfaction of accounts payable.
Accounts receivable, net as of June 30, 2009 was $2,186,000 compared to $2,643,000 as of December 31, 2008. This decrease is attributable to the timing of shipments and customer payments on balances outstanding.
As of June 30, 2009 our backlog was approximately $13,046,000, a decrease of $2,225,000, or 14.6%, compared to $15,271,000 at December 31, 2008. Timing for completion of the backlog varies depending on the product mix and can be as long as two years. Included in the backlog are all accepted purchase orders with the exception of those that are included in percentage-of-completion. Order backlog is usually a reasonable management tool to indicate expected revenues and projected profits, however it does not provide an assurance of future achievement or profits as order cancellations or delays are possible.
We believe that based on our historical growth rate, our cash and cash equivalents position at June 30, 2009 and available credit facilities, that our funds at June 30, 2009 will be sufficient to meet our working capital and investment requirements for the next twelve months.
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